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CISI Cards - Risk in Investment > CISI Risk - Chapter 1 > Flashcards

CISI Risk - Chapter 1 Flashcards

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1
Q

Why is credit, market and liquidity risk in the center of the Risk-Related regulation and policy diagram?

A

The management of these risks lies at the heart of the complex financial transactions performed by the industry.

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2
Q

What is investment risk?

A

Providing the ‘Right’ level of return to the investor

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3
Q

What is operational risk?

A

Risk arising from people, processes, systems and external events. These are the four key components of operational risk

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4
Q

What are the four key points of Operational risk?

A

People, Processes, systems and external events.

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5
Q

Difference between risk and uncertanity?

A

Risk - Variables that can be quantified
Uncertainty - Variable that can NOT be quantified

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6
Q

How is the ‘Risk Score’ calculated?

A

Probability X impact

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7
Q

Where does Risk Governance & Risk polices sit ?

A

At board level

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8
Q

Who performs risk oversight?

A

The business unit (the first line of defense)

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9
Q

Risk oversight - Who do action plans get reported to?

A

Independent Risk Management function

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10
Q

What are the four tasks performed by the Independent Risk Management function?

A

Identifying risks
Assessing Risks
Ensuring risks are appropriately controlled
Monitoring and reporting

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11
Q

Who performs Day to Day risk management?

A

Performed by the business unit, not the risk function

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12
Q

6 causes of external risk?

A

The global economy
Politics
Competitive enviroment
Social & Market forces
ESG
Technology and Cyber security

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13
Q

Types of external stakeholders and third parties (5)

A

Parent Company
Institutional Investors
Large customers
Regulators
Suppliers/Consultant
ESGs too

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14
Q

3 Main types of Political Risk

A

Rise & fall in invested markets
Increase/Decrease demand for products sold by the industry
Changes to the regulation/legislation in invested markets

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15
Q

ESG - Environmental Risks (2)

A

Climate change
Issues around the depletion of natural resources

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16
Q

ESG - Social Risks (3)

A

Reputation
Human Capital Issues
Stakeholder Opposition

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17
Q

ESG - Governance Risks (2)

A

Corporate Governance Issues
Corporate Behavior Issues

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18
Q

PESTLE Analysis - Stands for what?

A

Political
Economic
Social
Technical
Legislative
Environmental

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19
Q

What’s key process is used under Business Continuity Planning

A

Disaster Recovery

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20
Q

What are the two key impacts covered in Business Process Analysis

A

Internal and external impact on business processes

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21
Q

What are the three ways to assess external risk

A

Likelihood/Probability rating

Impact Loss rating

Risk score = Likelihood (1-5) x impacts (1-5)

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22
Q

What is strategic risk?

A

The risk of the outcome of a poor business strategy or the way in which is implemented across the firm

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23
Q

What is compliance risk?

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A

Compliance with regulation and legislation

24
Q

3 components to Financial Risk

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A

Revenues Vs Costs
Gearing/Leverage
BIS Three maintypes - Credit, Market & Operational

25
Who is responsible for creating/drafting and amending the Simple Risk framework
The board - Senior Managers
26
What is the identify part of the simple risk framework
Listing all te possible problems or hazards
27
What are the four key points in risk oversight
Identify, Asses, Monitor & Control
28
What is the Asses part of the simple risk framework
Grouping risks together and attempting to quantify their risk scores
29
What is the Control part of the simple risk framework
Setting limits and mitigation practices to the risks identified in the first stage
30
What is the Monitor part of the simple risk framework
Monitor effectivness and provide data for regualtors/board level
31
Is compliance an internal or external risk?
Internal - A firm can choose to comply with regulations
32
4 ways to asses internal drivers of business risk?
SWOT Analysis Stress Testing Scenario Analysis Risk Assessment Workshops
33
What are the two ways to externally assess risks?
Independent auditors Industry best practice
34
What is SWOT analysis
4 grid approach going through the firms weakness and successes
35
What is stress testing
One input factor at a time
36
What is Scenario analysis
Constructing realistic scenarios, multiple factors at a time
37
6 Methods used to reduce business risk?
GAP Analysis Market surveys Market research R & D Liaison with regulators Test-Marketing
38
What is risk culture?
System of values and behaviors throughout an organization
39
What is risk appetite
The type and amount of risk a firm is willing to accept in the pursuit of business objectives
40
Who does the top-down approach involve?
Board and senior management
41
Who does the bottom-up approach involve?
Line management
42
What is a risk profile?
The type and intensity of the risks to which a firm is exposed to
43
When launching a new product, how do firms often justify the strategy?
Cost/Benefit analysis
44
What is Inherent (Gross) Risk?
Risk without mitigating controls
45
What is residual (Net) risk
Firms exposure after taking mitigating controls
46
What is market risk
Changes in value of financial instruments
47
What is funding liquidity risk?
Firm can not obtain necessary funds to meet their obligations
47
What specific product is exposed to interest rate risk?
Balance Sheets
48
What is the purpose of an ICO? (Initial Coin Offering)
Raise Capital
48
What is interest rate risk?
Exposure to adverse movements in interest rates
49
What is RegTech?
Regulation surrounding FinTech activities and products
50
What is the fine for breaking the GDPR?
4% or 40 million.
51
What is sovereign risk?
Government defaulting on their loans
52
What is a 'Hot' site
Online storage site of crypto. Asset and encryption key stored SEPERATELY
53
What is a 'Cold' site
Offline storage of crypto assets in bunkers and vaults.
54
What is enterprise risk management ?
Enterprise risk management is a method of providing the firm with a succinct view of all its key risk information, thus enabling the senior team to make balanced, firm-wide risk decisions.
55

CISI Cards - Risk in Investment (19 decks)

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